Research houses mostly positive on Axiata's 1q15 performance

Axiata yesterday announced a lower first-quarter pre-tax profit of RM689.96 million compared with RM1.01 billion in the same period last year.

However, Axiata registered higher revenue of RM4.75 billion from RM4.52 billion previously.

In a note Tuesday, Maybank IB Research said the telco's first-quarter result was in line with expectations, although the company had earlier guided itself for a weak quarter.

The research house said 2Q15 guidance will likely remain tepid, given ongoing operational challenges at Celcom, facing tail-end information technology issues.

Its Indonesia subsidiary, XL, is experiencing another quarter of transition following a strategy shift.

"Re-rating will likely be at 2015 second half," it said adding, it had reiterated an unchanged "buy" call on its securities with a target price of RM7.60.

Meanwhile, AllianceDBS Research said Axiata's company's earnings before the interest, taxes, depreciation and amortisation (EBITDA) margin contracted 40 per cent in the quarter, on the back of higher network costs and higher proportion of device sales.

"FY15 seems to be another muted year for Axiata, as the change in XL's business strategy will result in short-term pressure on revenue," it said, while indicating a potential catalyst would include the recovery in Celcom's performance.

The research house made a "hold" call on Axiata with a target price of RM6.60.

Meanwhile, Affin Hwang Capital Research, echoed Maybank IB Research, stating that Axiata's 1Q15 were within expectations and believes the EBITDA margin could recover moving forward.

The research house upgraded its "sell" call to "hold", with a target price of RM6.39, following the stock's recent share price weakness, it said.